By Richard Hubbard LONDON, Aug 14 (Reuters) - European shares inched up on newsthat the euro zone had emerged from recession on Wednesday,while sterling jumped against the dollar as robust jobs datacast doubt on the Bank of England's pledge to keep interestrates low. Financial markets though were mostly subdued andconfirmation that the euro zone's 18-month-long recession wasfinally over had been widely expected, limiting share marketgains. U.S. stock index futures pointed to a flat open on WallStreet. Sterling was the main mover, hitting a high of $1.5507 when new data showed a sharp drop in jobless benefitclaims in July and minutes from the central bank's last meetingrevealed one policymaker had voted against a historic move totie future interest rates to unemployment. Governor Mark Carney outlined the BoE's flagship policy -which will see rates kept low until joblessness falls to 7percent, subject to certain safeguards including inflationstaying in check - on Aug. 7 after a meeting of the bank's ninepolicymakers. The minutes and stronger labour market data prompted moneymarket traders to price in a greater chance of a rate hike inthe bank's base rate in two years - a yearearlier than the BoE has signalled. "Before the ink is hardly dry on the forward guidancedocument there is someone saying they don't like the idea," saidBrian Hilliard, UK economist at Societe Generale. "If the numbers improve, the market will question the limitsof the time horizon of forward guidance out to 2016." The UK's main share index, the FTSE 100 dipped 0.1percent but volumes were only around one-fifth of their dailyaverage and the index remained well within its recent tradingrange.

GROWTH FINALLY The euro gained initially in reaction tostronger-than-expected German and French GDP data, whichreinforced expectations the currency bloc's economy had grownafter six quarters of contraction. The European Union's statistics office later confirmed a 0.3percent expansion in the three months to June, after which theeuro drifted back to be 0.1 percent lower at $1.3250. Bailed-out Portugal posted the best growth in the regionwith a 1.1 percent expansion in the second quarter, but it wasGermany's 0.7 percent quarterly growth rate, its fastest in overa year, which powered the recovery. "The euro zone has been hauled out of recession and Germanyhas done the lion's share of that," said Andreas Scheuerle,economist at Dekabank. The euro zone's blue chip Euro STOXX 50 index was up 0.2 percent though it is near the highest levels for theyear, after six weeks of gains. Prices for 10-year German government debt did not move muchafter the data, though as traders adjustedpositions after a slump in demand at a subsequent bond auction, yields did creep higher to around 1.81 percent. The dollar stayed broadly firm following forecast-beatingU.S. retail sales data on Tuesday, which increased the prospectsof the Federal Reserve scaling back its stimulus as early asnext month. Against a basket of currencies, the dollar stood near aone-week high, while against Japan's currency it was littlechanged at 98.13 yen.

FED FEARS Yields on benchmark U.S. 10-year Treasuries, which have beensupporting the U.S. currency, edged down to around 2.718percent, just off Tuesday's near two-year peak of 2.72 percent. Investors have largely positioned for the Fed to starttapering its $85 billion a month of bond purchases soon, but arelooking for more data to support that view. Talk about the Fed's next step escalated on Tuesday whenAtlanta Fed President Dennis Lockhart said it was too early todetail plans to taper, while at the same time not ruling out thepossibility of it starting next month. His suggestion that any move would be neither nor drasticboosted sentiment in U.S. stock markets that carried into Asiantrade, helping Japan's benchmark Nikkei stock average tofinish at a one-week high. MSCI's broadest index of Asia-Pacific shares outside Japan was little changed though with Hong Kong marketsclosed due to a typhoon. The evidence of improving global growth from the latestEuropean and U.S. data helped copper gain 0.5 percent totrade near a nine-week high of $7,317 a tonne. However, concerns about the Fed curbing itscommodity-friendly stimulus are limiting gains with gold recovering slightly to $1,324.85 an ounce and Brent crude stuckjust above $109 a barrel.